Far away in the backdrop of the 2012 Presidential election, laid a secondary story that would make for primetime headlines on any other given day. That particular secondary story was none other than the states of Colorado and Washington successfully passing constitutional amendments that legalized recreational use of marijuana.Unlike California and fifteen other states, citizens in Colorado and Washington will not be required to have a medical prescription from a physician to legally possess marijuana.[i] Instead, personal possession of up to an ounce of marijuana will be legal for anyone who is 21 years of age or older.[ii] Though the passing of the law reflects a growing national support for measures that either legalize the drug or aim to reduce the criminal punishments associated with it, federal law still dictates that marijuana is an illegal substance.Consequently, who wins? Does the argument of states as ‘laboratories’ supersede the notion of federal preemption, or will the Department of Justice (DOJ) and the Obama Administration swoop in and overturn the will of the states’ citizens? For the states, winning this legal battle has much to do with the monumental financial benefits it stands to gain.

The Economic Implications

The economic impact of legalized marijuana is projected to be a substantial financial savior for many states that are fiscally stretched thin and unable to properly fund many of their programs.The national marijuana market is estimated to be worth between $10 billion to over $120 billion a year.[iii]An August 2012 report suggested that Colorado stood to generate nearly $60 million in revenue for the state in the first year of legalization and eventually $100 million dollars after five years.[iv] Colorado would institute an excise tax of no more than 15% to be applied to marijuana produced by a cultivation facility, a state sales tax of 2.9% and an additional local sales tax.[v] The states would only permit state-licensed stores to sell marijuana and thus subsequently tax them.[vi] Of the tax revenue, Colorado has already pledged the first $40 million to construction of needed schools, which will result in the creation of new jobs.[vii]In addition, both states project to gain instant savings via reduced criminal costs. In Colorado about 10,000 and in Washington about 13,000 people per year are arrested for marijuana offenses.[viii]Proponents also believe that legalizing marijuana will reduce the funds criminal organizations receive from the previously illegal product and will allow law enforcement agencies to focus it’s resources on more violent crimes than possession of marijuana.

The Legal Controversy

For the many that welcome DOJ intervention, they believe that this is an issue of morality and legal precedent. That a failure to challenge the legality of such legislation counts as a travesty in the battle of keeping a drug perceived to be harmful out of reach to individuals. The Controlled Substances Act (CSA), a federal statute, classifies marijuana as a “schedule 1” substance on par with heroin; making it illegal.[ix] Thus, the federal government has the authority to block the states’ legislation by way of preemption. Federal law has the luxury of trumping state law, simple as that. If the Obama administration stands against the amendments and the states do not relent, the controversy could potentially make its way up to the Supreme Court of the United States.

As many believe that the federal government would rely on marijuana’s classification of a “schedule 1” substance under the CSA, some proponents are in favor of trying to reclassify marijuana. Recently, federal judges in Washington, D.C. heard oral arguments in the case Americans for Safe Access v. Drug Enforcement Administration.[x]The plaintiffs are arguing that marijuana’s medical benefits dictate that its current classification needs amending.The federal government argues that any such studies that support the medical efficacy of marijuana are not rigorous enough to warrant a classification change.[xi]

So what’s the likely outcome? Should hippies, medical believers, and citizens of these two states rejoice in their newly voted upon gold mine? In my opinion, not so much and certainly not so fast. Some believe that the Obama administration’s silence on the issue is indicative of their positive lean towards supporting the measure. However, lest we forget, 2012 was an election year. Coincidentally, Colorado and Washington were both crucial swing states.Political savvy would urge any candidate to reserve any form of condemnation for a populous opinion until after the election season. Now that the election has passed, it’s likely that the federal government will restrain the states from progressing beyond the medical marijuana loophole that has been widely accepted. In 2010 California unsuccessfully tried to pass a similar effort, Proposition 19, which would have legalized recreational use of marijuana.[xii]The current Attorney General Eric Holder then stated that he would “vigorously enforce” federal prohibition on carrying, growing, and selling marijuana if the proposition passed.[xiii] Thus, it’s probable that the Obama administration and the DOJ would take a similar stance.

The curiosity of gaining revenue in an economy where so many, on both the federal and state level, have scratched their heads in dismay in trying to create sustainable financial growth is as appealing of a story as any. Why increase the tax rate when one could simply broaden the tax base? Also, what ever happened to the concept of states being ‘laboratories’ and maintaining some level of autonomy that does not bend to the will of an “overbearing” central government? Then again, morality and federal preemption should very well take precedent in this situation for very good reasons. The financial and legal implications of this dilemma are monumental. No matter which side you take, this secondary story will soon be a leading headline worthy of national debate.

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